Jack Ladowsky v. Minister of National Revenue, [1996] 3 CTC 195

Simpson J.: — Let the attached transcript of my Reasons for Order delivered orally from the Bench in Toronto, Ontario, the 2nd day of April, 1996, now edited, be filed to comply with section 51 of the Federal Court Act.

This is an application for judicial review of a decision of G.J. Baronette (“Baronette”). Baronette was the Director of Toronto Centre Tax Services and his decision was dated February 24th, 1995 (the “Decision”). Baronette denied the application of the Fairness Legislation to waive or cancel penalties or interest owed by the applicant on unpaid taxes. The applicant is representing himself in these proceedings.

The facts are derived from an affidavit of Grant Vandervoort (“Vandervoort”). Vandervoort is the Assistant Director, Revenue Collections at the Toronto Centre Tax Services. His affidavit discloses that, on December 8th, 1992, the applicant’s accountant sent a letter requesting relief under subsection 220(3.1) of the Income Tax Act, S.C. 1970-71-72, c. 63 (the “Act”). The accountant cited substantial business losses in 1992 as the cause of the applicant’s financial difficulties.

The application was reviewed by R.D. Jenkins (Jenkins), who was the Manager of Revenue Collections. Jenkins noted that the applicant had repaid monies previously withdrawn from his company rather than pay outstanding tax. This repayment created a non-capital loss that the applicant intended to carry back. Jenkins noted that the repayment was a legitimate tax manoeuvre, but that the Fairness Legislation was not intended to be a vehicle for retroactive tax planning. He further concluded that there was no evidence of financial hardship.

The review by Jenkins was the basis of a letter sent to the applicant on February 2nd, 1993 from Pierre Gravelle, Deputy Ministry of Revenue, which denied the applicant relief under the Fairness Legislation.

By letter dated February 10th, 1994, the applicant again requested relief under the Fairness Legislation and, specifically, he asked for cancellation of his 1990 tax arrears, interest and fines. The applicant provided further information by letter dated March 9th, 1994. He indicated that his wife’s income was not at his disposal and that he was supporting his father and children on his income alone.

A review of the applicant’s request was made by V. Khan (“Khan”), a Collections Officer. In this review, Khan took into account the applicant’s spouse’s financial situation, noting that she had considerable income from buying and selling T- bills, as well as interest income. Khan also concluded that the applicant was asset rich and could dispose of the condominiums that he and his spouse owned. The applicant had indicated that he could not sell the properties since he would then be assessed for recaptured capital cost allowance.

By letter sent to the applicant on June let, 1994 by E.P. Lutz (“Lutz”), the applicant was reminded that his application had already been reviewed and rejected and, since no new information was forthcoming, his file was closed.

On June 28th, 1994, the applicant called the Fairness Committee. In response to this inquiry, Lutz prepared a memorandum dated October 11th, 1994 recommending the applicant’s application be denied under the Fairness Legislation.

Finally, the applicant had a personal meeting with Jenkins in December of 1994. On February 14th, 1995, Vandervoort reviewed all of the material in the file and recommended to Baronette that the application for fairness be denied, because the applicant had not demonstrated that the original non-payment of tax had been beyond his control or that the payment of the arrears, interest and penalty would result in undue hardship.

In his Decision dated February 24th, 1995, Baronette told the applicant that, after a full review of his submission in relation to the Fairness Legislation, the request for relief was denied.

The Issue

The issue on these facts is whether, in the exercise of discretion in the context of an administrative decision under the Fairness Legislation, there was a failure to follow the rules of natural justice and procedural fairness.

Discussion

The applicant’s application was reviewed by Jenkins in early 1993, by Khan in the spring of 1994, by Lutz in October 1994 and by Vandervoort in February of 1995. While the applicant undoubtedly feels hard done by, there is no evidence in the record that he has been treated unfairly in the legal sense. However, the applicant also alleges bad faith. He submits that the respondent breached section 241 of the Act by disclosing to him confidential information about his wife’s tax form. Yet the applicant put her affairs in issue when he sent in T-4 forms which showed that his company made payments to her. He also disclosed that she owns 50 percent of his four condominiums. In so doing, the applicant made it clear that at least some of his affairs were intermingled with his wife’s financial matters. In these circumstances, in the context of his application for discretionary relief, it was, in my view, within the respondent’s obligation to consider the applicant’s wife’s affairs and to disclose them in the course of explaining its decision to refuse the applicant’s application.

Finally, it should also be noted that the applicant’s company did receive relief under the Fairness Legislation.

In all these circumstances, I can find no evidence of bad faith on the respondent’s part, which would entitle the applicant to relief on this application.

Accounant’s Error

The applicant mentioned in argument before me on November 20th, 1995 that his tax liability was due to an error made by Deloitte and Touche, and that this was discussed with the Tax Department in December of 1994 and that there was a letter from the Respondent which recognized the error. I adjourned these proceedings so that both parties could search for evidence that such an error had been made and recognized by the Tax Department. Had it been the case and overlooked in the Decision, such an oversight might well have been a reviewable error.

On resuming this morning, the Respondent filed a letter from Deloitte and Touche dated August 7th, 1991 (the “Letter”), in which the firm acknowledged that its error was responsible for the late reporting of a dividend in the amount of $43,750. The Letter indicates that Deloitte and Touche paid the penalties for the late filing in respect of that dividend. Deloitte and Touche also submitted in the Letter that subsection 163(2) penalties would not be appropriate.

Counsel for the Respondent advised the Court that no penalties had been charged to the applicant in respect of this incident.

Accordingly, I can find no material error arising in respect of the accountant’s error.

Conclusion

The application is dismissed.

Application dismissed.